Invoice Discounting is a flexible funding alternative to traditional Overdraft Facilities and Loans which are often too inflexible to cope with the needs of a young and growing business . The main advantage is that funding grows as your business grows and the facility is secured against your debtors ledger removing the requirement for pledging of tangible security (property, 2nd charges on personal house etc) traditionally required to secure increased overdraft facilities.

It is a totally Confidential Facility where your customers are unaware of the Bank / Debtor Finance company’s involvement and you remain responsible for the administration of your debtors ledger. The Debtor Finance company will initially survey your accounting systems and if this is satisfactory they will place reliance on your internal control systems.
  
How Invoice Discounting Works

• The client sends his customers invoices for completed work.
• The client sends a sales day book listing to the Discounter notifying them of the invoices.
• The Discounter pays up to 80% of the invoice values to the client immediately by telegraphic transfer.
• The client runs the sales ledger - telephone/statements.
• The client collects payment from the customers, banks the payments into a trust bank account held in the Discounters name and notifies the Discounter of the lodgement
• The Discounter collects the funds from the trust bank account and releases the balance of 20%, less charges, to the client.

Obviously in most cases there will be an existing sales ledger in place when the Invoice Discounting Agreement commences. In this case the Discounter can make available funding of up to 80% of the qualifying book debts, which in many cases can provide a healthy cash injection, even when existing bank overdrafts have to be repaid.

Invoice Discounting Costs
There are two main charges in Invoice Discounting Agreements:-

• Service Fee - This is a percentage charge on the clients actual turnover: usually 0.1% to 1.0% of invoice value.

• Cost of Money - This is an interest charge on the funds advanced by the Discounter: usually 1.0% to 3.0% over bank base rate. This charge is usually quite competitive when compared to bank overdraft rates

How does factoring work?

Factoring  offers most businesses an added advantage in raising funds or general cash flow assistance by providing cash against unpaid invoices. Due to the innovative way that borrowed money is secured, factoring frequently allows businesses to borrow larger amounts of money compared to more traditional forms of commercial finance such as bank overdrafts.

With our factoring product, you will receive advances of funds against outstanding sales invoices. You inform us electronically or by post that you have issued an invoice. Up to 90% of the value of your invoices can be paid out within 24 hours of raising them. The balance is made available when your customers settle their outstanding debts.

Our factoring service can also provide credit management releasing valuable time for your business. Having agreed procedures with you, statements and reminder notices would be sent to customers reminding them of outstanding debts. You will remain in control of your customer relationships at all times Factoring normally works as follows:

There are many ways in which a factoring agreement can be managed and we would be happy to discuss your specific requirements

Why factor? Ask yourself - how could you improve your business?

• Expand current operations
• Upgrade plant and machinery
• Employ extra staff to seek out and fulfil new orders
• Increase sales and marketing efforts
• Develop new products